Best Mutual Funds for Lumpsum Investment

Best Mutual Funds for Lumpsum Investments are a myth to clueless investors, and a reality to those who know their way around. This statement, although correct, is probably too objective to interpret the underlying sentiment. Let us simplify this for you.

Investors should note that sometimes certain entities advertise previous short-term gains made by their schemes to attract investors. This is purely a marketing gimmick investors should avoid falling for, since the quantum of the gains made previously can be manipulated by changing the "cut-off" dates.

Investors ought to shortlist funds for investing that suit their profile. By profile we mean, their age at the time of investing, their purpose of investing, and the tenure they want to allow the money to cook, among other things.

Also, timing the market plays a crucial role when investing in a lumpsum as the number of units allotted varies significantly depending on the buying price and the investment amount. A wealth management professional with his expertise can be the difference in scenarios like these.

The Best Mutual Funds for Lumpsum Investment can only be identified by scrutinising all these underlying aspects, something that professionals are best suited for.

For our investors’ convenience, we have listed below Mutual Fund schemes that are being considered the “best” for Lumpsum Investment in the current scenario. We, however, would like to reiterate that there are no universally beneficial Mutual Funds for Lumpsum Investments, because each investor’s needs are different. Therefore, their investment options should be shortlisted accordingly. Please reach out to us to figure out schemes that will complement your needs.

So, how to select the best Mutual Funds for lumpsum investment? It certainly cannot be done based on previous performance, this much we can safely say by now.

See, half-cooked research can never beat the inputs of a certified professional. Why? For the same reason, a fisherman cannot outrace a sailor at sea. The reason a regulatory body like SEBI exists is that investor interests need safeguarding. Wealth management professionals are a thing for the very same reason.

Individuals DIY-ing (not "dying") their investments often find themselves at the wrong end of the rope, because they do not have the bandwidth, nor the time needed to actively monitor the market. The existence of professionals, on the other hand, is validated by their ability to scrutinise investment schemes, Mutual Funds for lumpsum included.

Now, let's address the elephant in the room. How to Select the Best Mutual Funds for Lumpsum Investment? By seeking professional help. Investors need to know their priorities, and they should be conveyed to the professional helping them shortlist an appropriate Mutual Fund scheme, so a selection can be made accordingly.

As discussed, professionals have the tools and insights needed to shortlist investment options based on merit. Also, they are actively involved in all aspects of the financial universe, which helps them identify any underlying issue a promoter may not have revealed. Moreover, it is important to time one's entry when investing in Mutual Funds in a lumpsum. A well-timed entry can translate into additional units in a scheme since unit costs are sure to dip in a flattening market.

Knowledge is the vehicle that drives all success, investing included. It's okay if you don't have the know-how needed to invest properly. You cannot allow such handicaps to hamper your growth. Talk to a professional, that's what they are for.

There are various benefits of investing in mutual fund in a lumpsum.

Listed below are some of them-

Investment in Big Amounts

One of the primary advantages of lumpsum mutual fund investments is that investors can make a large investment in one go. As a result, when the market escalates, the investment’s value increases rapidly.

No Investment Commitments

SIP investments require regular contributions from the investor, thereby mandating a more disciplined approach towards investing. Lumpsum investments, on the other hand, allow for a one-time contribution, requiring little to no consistent efforts from the investor.

Convenience

Investments in mutual funds via lumpsum are way more convenient than SIP. In lumpsum investments, investors can invest in one go and watch the investment grow, whereas in SIPs, investors are required to make timely payments.

Better Utilization of Funds

Certain individuals keep receiving income like payouts, such as incentives, bonuses, rent etc., every once in a while. Instead of keeping them idle in bank accounts, investors can deploy them as a lumpsum in mutual funds and maximize their overall corpus.

There are some great features that accompany investments done in a lumpsum.

Read on to find out.

Minimum Investment

Investing in mutual funds is a single transaction, and in most cases, the minimum amount required to make a lump sum investment is Rs.5,000. However, if need be, investors can make further contributions to the same scheme by investing in multiples of Rs. 1,000.

Convenience

Lumpsum mutual fund investments are far more convenient than SIPs. Lumpsum investments allow investors to be done making further contributions. Instead, they can sit back and watch it to grow, whereas SIPs require investors to make regular payments.

Market Volatility

When investors invest a lumpsum amount in one scheme, the chances of suffering loss are higher if the market falls. The advantages of a lumpsum investment are especially evident when the market is at a low point. Investors can get more mutual fund units at a lower price and then sell them when the market increases, resulting in a significant profit.

Investment in mutual funds can be made through Systematic Investment Plans (SIPs) or a lumpsum. While SIP refers to investing in mutual funds regularly, lumpsum investing refers to depositing a significant amount in one go. However, each investment has its pros and cons; investors must choose an investment mode according to their financial goal.

Listed below are the benefits of investing in a lumpsum as opposed to SIP investments-

Convenience

Lumpsum mutual fund investments allow the investors the convenience of zero investment commitments. Investors do not need to make any timely investments like in SIPs. Instead, they can invest in one go and watch it grow in the market. It is preferred by self-employed people and those who do not have consistent surplus revenue streams.

Power of Compounding

SIP investments generate returns in portions after receiving the scheduled contributions. Lumpsum investments, on the other hand, generate returns by working the contribution in its entirety, allowing the investors to benefit from the power of compounding more effectively.

Beneficial in Bull Market

Investment done in a lumpsum during bull markets is pretty beneficial. It allows the investor to make the most of market rallies since the entire investible amount is put to work. On the other hand, in SIPs, the contributions are made over time, due to which only a part of the entire surplus can earn at a given time.

As established previously, various companies tend to claim beyond normal returns by revealing the yield a Mutual Fund may have fetched within a "specific" timeframe, which has misled many to invest in undeserving schemes.

Let's dig deeper to better understand this.

In March 2020, the Indian stock market had experienced a devastating crash. Since then, however, the recovery was incredible, riding on which several Mutual Fund schemes raced their way to normalcy. Entities promoting Mutual Fund schemes, however, saw this as an advertising opportunity and improvised their projections to exclude the dip experienced in March 2020, and consequently reflect eye-popping gains manifested through superior stock-picking.

This was not the first time such a marketing strategy had been deployed to invoke investor sentiment, and it most definitely won't be the last. The best thing an investor can do to avoid falling into this trap is refraining from investing in Mutual Funds based on previous short-term gains. This is also advisable because Mutual Funds manifest gains over time through compounding and the practice of shortlisting schemes only on previous returns won't ensure similar returns in the future.